Presco has made an offer to Siat SA to acquire 100% of the 7,330,965,143 ordinary shares of Siat Nigeria Limited held by SIAT SA for a cash consideration of N21 billion . This translates to a price of approximately N2.865 for each ordinary share in Siat Nigeria Limited. As a result of the Acquisition, SNL will become a wholly owned subsidiary of Presco as outlined in the terms of the Acquisition.
As custodians of the leading integrated agro-industrial company in Nigeria, the Board of Directors and management team of Presco have focused on identifying the right strategies to drive sustained long-term growth and profitability of your Company. In line with this objective, a detailed review of the strategic opportunities available to the Company was explored and Board reached a decision to propose the acquisition of a 100% equity stake in Siat Nigeria Limited (SNL) as a strategy to increase shareholder value.
The Directors of Presco have taken the strategic decision to propose the Acquisition with a view to maximizing value for all shareholders and enhancing the operational efficiencies of the enlarged entity post acquisition. The acquisition will ultimately lead to reduced overhead and increased revenue through the exploitation of operational synergies across Presco and SNL.
The Board of Presco believes that the proposed Acquisition will provide a number of strategic opportunities and benefits to the shareholders, employees and customers of Presco. The benefits/effects include the following:
- With significant capacity for expansion via new plantings in the Elele and Ubima plantations, the Acquisition will significantly contribute to the Company’s growth aspirations. Presco’s Sakponba estate will be fully planted in the coming 2-3 years, resulting in Presco not having extra expansion possibilities immediately thereafter until additional land is acquired and mandatory new planting procedures completed. While Elele is fully replanted, a large portion of Ubima (+/- 7,500 hectares) still needs to be replanted.
- Greater economies of scale as a result of the cost base being spread across a larger operating base which will now effectively operate a larger plantation size by 39% to 38,717 ha in 2021. At the end of 2020, Presco had 23,502 hectares planted versus 15,215 hectares in SNL
- As a wholly owned subsidiary of Presco, following the acquisition, Presco will have the option to merge with SNL, which will allow Presco to fully extract the synergies of the combined entities. In the long term BP a comparison was made between Presco stand alone and Presco merged with SNL. From day one extra shareholder value is created, since the acquisition of SNL is not financed by new equity.
- Improved operational efficiencies through the alignment of strategic priorities and the leveraging of resources across both entities. For example, at the moment Presco has a mill capacity of 90 tons per hour. Over time a new mill is planned to be built in Sakponba estate. SNLhas a 60 ton mill. Whereas the Presco mill is close to full capacity in peak season, the SNL mill will only reach its capacity based on own production by 2029. This will allow Presco to be more flexible with the Sakponba estate production and postpone capex. Presco has a 500 ton per day vegetable oil refinery commissioned end of first quarter of 2021. Even with all the CPO produced in SNL, Presco will be able to process all CPO produced till 2030 in the vegetable oil refinery and increase the benefit of value added.
- Increased competitiveness of the larger entity through the leveraging of the individual company strengths and the exploitation of synergetic opportunities across the supply chain
- The Acquisition is expected to increase the market value of the larger entity listed on the NGX post the Acquisition
- The structure of the Acquisition which does not involve the issuance of Presco’s shares, ensures that Presco’s shareholders will not face dilution of their shareholding on account of the Acquisition.
- The communities in which the operations of SNL are embedded will continue to benefit from the positive economic impact of proximity to its operations which will be enhanced by the direct affiliation with Presco
SNL was incorporated on 11 December 1991 as a wholly owned subsidiary of Siat SA. In 2011, SNL acquired the assets of Risonpalm, which comprised 16,000 hectares of old palm plantations, as well as the entire social and industrial infrastructure of the industrial oil palm complex from the Rivers State Government.
SNL operates from two estates in Rivers State, the Ubima Estate and the Elele Estate and over the last five years, has invested N6 billion in developing its operational capacity. SNL currently produces crude palm oil and crude palm kernel oil. SNL has a total planted area of 15,215 ha, with 51% thereof being plantings of between 1 and 5 years old. The management of SNL expects strong revenue growth from FY21 to be driven by increased yields of fresh fruit bunches and oil extraction rates from the recent replantings of the oil palm plantations in Elele and Ubima estates.